Did you know that you can own a piece of Manchester United or the New York Knicks?
In this article, we are doing some playful research here at the ScoreMetrics Lab to evaluate whether or not the stocks of publicly traded sports teams have been good investments. We also compare the returns to what you should expect to be making in sports trading.
Let’s see what we found out!
Which sports teams are traded publicly?
Currently, the only US sports teams that are available for investors in the stock market are the ones controlled by Madison Square Garden Sports Corp. The company manages the New York Knicks and the New York Rangers, along with their NBA G League and AHL affiliate teams, the Westchester Knicks and the Hartford Wolf Pack.
The Madison Square Garden Company spun off its entertainment division from the sports management company in the spring of 2020, so looking back at the performance of the stock means that we are also looking at how MSG’s entertainment business has fared in the market.
In the past five years, the MSGS stock has gained 34%.
Other US sports teams have made appearances in the public market. The Boston Celtics were publicly traded from 1986 to 2003 – the stock gained 75% during that period of time.
The Cleveland Indians were on the market from 1998 to 2000, more than doubling the money for investors. The Florida Panthers also had a stint from 1996 to 1999 – an investment that would have ended about 1% on the minus.
Plenty on European soccer clubs are currently available in the market. Manchester United plc. is even traded in the NYSE – investors would be looking at -19% ROI for the past five years.
In the European stock markets, some of the top clubs have been good investments if we look at their performance in the past five years. Juventus Football Club (Italy) stock is up 236%. Benfica’s (Portugal) stock has gained 229% in that same period, while Borussia Dortmund (Germany) is up 42%.
But when we look at the all-time performance of these stocks, since the beginning of their public trading, they have all been losing investments with -21%, -22% and -43% ROI’s respectively.
So, the small sample of US teams have generally been decent investments, and European soccer clubs seem to be on the up recently, but not looking great in the long run.
If we look back into more historical performances and add more teams into the mix, we can see that publicly traded sports teams do not necessarily make for a great portfolio. Taking into account the volatility of such stocks, it would probably have been better for investors to put money in an S&P 500 index fund instead.
What can you expect to make in sports trading?
This is what we wrote on the topic in our article on measuring the performance of your sports trading system:
First of all, let’s establish that it is not easy to make it big in this field. To get where we are with our ScoreMetrics systems, we have had to do years of research and testing. But if you are willing to put in the time and effort, the payoffs can be pretty amazing.
In fact, our systems generated an ROI of 173% during baseball season and 168% during football season last year alone.
Those are big numbers, but what would be the baseline for success – the minimum target you should be aiming for when building sports trading systems?
The simple answer is that at the minimum, you should aim to beat passive investment opportunities – such as stock index funds. So, one easy way to measure if you are successful in sports trading is to compare your annual returns to that of the average annual return of the S&P 500 index, which has been roughly 8% (from 1957 through to 2018).
Generating a return that’s less than that 8% number means that you are using your time in actively managing a system while making less money than you would be making if you would have invested the same amount with a single click on a low-to-zero cost index fund.
When we are aiming for more than 150% gains every year, the ROI’s for the sports teams listed earlier start looking even worse.
Sports trading is an exciting market, and there is plenty of money to be made right now with sports being back in our lives.
And while we don’t necessarily advocate for putting all of your extra money in your sports trading portfolio, we would perhaps look for other avenues in the stock market rather than investing in sports teams.
To take advantage of the return of sports and to learn everything you need to know about smart investing in the sports betting market, check out our head trader John Todora’s new book – “Zero Correlation Investing – The Score Metrics Secret”. It’s currently on sale for a limited time, so go get yours now!
The ScoreMetrics Lab is the engine that runs the Sports Trading System operation, consisting of a team of researchers and writers who are constantly testing and retesting algorithms. They work hand in hand with our Head Trader and Creator of ScoreMetrics, John Todora to help find new breakthroughs and develop new systems.